U.K. citizens will not draw their state pension until the age of 70 by the year 2064, said the government's economic forecaster, the Office for Budget Responsibility.
Analysis by the OBR showed that by linking the state pension age to longevity — a move announced by Chancellor of the Exchequer George Osborne last year — the age of collection will have to rise to 70 years old in 2063-'64.
Mr. Osborne already has announced the minimum age to draw the state pension will rise from the current 65, to 68 in the mid-2030s, and to 69 by the late 2040s.
Using the 2012-'13 Whole Government Accounts, a consolidated set of accounts for the U.K. public sector, the OBR calculated the net present value of the liability at £1.2 trillion ($2.1 trillion), equal to about 73% of GDP, as of March 31, 2013.
That was an increase of 11%, or £166 billion, from the previous year.
“While some of this reflects an increase in the expected future flow of pension payments — due to an additional year of public employment — much reflects the fact that the projected flow has been converted into a one-off upfront net present value sum using a lower discount rate,” the OBR wrote in its analysis.
The OBR also projected future costs of an aging population. Its projection shows state pension costs will increase to 7.9% of GDP in 2063-'64, from 5.5% of GDP in 2018-'19. “We assume that this brings forward the rise in the (state pension age) to 68 and introduces rises to 69 and 70 within the projection horizon,” the OBR wrote.
